The First changes to UK company law is expected on 4 March 2024

Economic Crime is a major issue in the UK – The National Crime Agency (NCA) estimate money laundering costs the UK more than £100 billion each year. The UK Government is committed to tacking this issue, using ‘The Economic Crime and Corporate Transparency Bill.’ In this blog, our dedicated virtual office team will outline the forthcoming changes that are likely to impact our clients. A major part of the Bill includes significant reforms to the role and powers of Companies House. The Economic Crime and Corporate Transparency Act gives Companies House the power to play a more significant role in disrupting economic crime and supporting economic growth. The act recieved Royal Assent on 26 October 2023.

Timeline: How did this all start?

February 2022, the White Paper that started it all, was published. After some amendments it was later passed through Royal Assent and became law. These changes are due to be introduced March 4th this year. The bill will reform the role of Companies House and improve transparency over UK companies and other legal entities in order to strengthen our business environment, support our national security and combat economic crime, whilst delivering a more reliable companies register to underpin business activity.

So…how does this affect you and your business?

ID Verifications

Companies House are preventing fraudulent appointments– making it harder to register fictitious directors or beneficial owners – by requiring everyone’s ID documents verified.

How does this help business owners?

– Assurance for businesses that the information on the register is genuine

– Assurance if Companies House is used for researching that the Directors/Persons of Significant Control’s information is accurate − E.g. customers, suppliers, partners, lenders, employees, potential investments or acquisitions.

Whose identity must be verified?

New Directors

• Individual directors – ‘Individual’ meaning ‘Human’

− At least one director of UK company must be an individual

− Each individual’s ID must be verified to Companies House

• Corporate directors – companies can have a corporate director, but, the directors of it must be (1) individuals and (2) ID verified. That means a corporate director can’t have a corporate director (‘one layer’ rule)
• New rule that a corporate director can’t be foreign entity – it must be a UK body

What if an identity is not verified:

• New unverified officers will not be registered by Companies House
• Appointee commits an offense if they act as an Officer whilst unverified BUT it doesn’t affect validity of Officer Acts
• The company and its officers also commit an offense if they allow an appointee to act whilst unverified
• Possible civil penalties/problems in disqualification proceedings
• Ability to make future filings may be compromised

Due Diligence on Partnerships

All 3^rd party vendors and business partnerships you enter into agreements with must be vetted to limit blowback risk.

Enhanced Due Diligence (EDD) is a process used to gather more comprehensive information about their customers, particularly those who pose a higher risk due to various factors. Understanding EDD is important for ensuring regulatory compliance and mitigating risks.

What will you need to do?

• You will need to do your own Due Diligence on all third-party vendors you use. This includes external Accountants, HR Providers, Wholesale Retailers etc.
• Keep a record of what investigations have been conducted and what you have discovered, if any.
• Report any discrepancies to the appropriate regulatory bodies.

Why do I need to do this?

With new powers at Companies House, they will also be doing these checks, whether randomly or regularly (to be considered).

Companies found to be associated with a convicted company without having performed Enhanced Due Diligence checks, may also be deemed complicit and will commit an offense.

New Companies House Powers

Before the Companies House Reform, they could do very little. Now that this bill has passed, they have acquired new powers such as:

• May not incorporate companies or change Company Names suggesting connections to foreign governments. They will require further proof.
• May not re-register names that imply the restoration of a company.
• Companies House can simply change the name of your company if they do not find it appropriate. You will be notified.
• Email addresses will become a requirement for communication with you. It will be an offense not to maintain this.
• If Companies House have contacted you and you have not actioned their request, they may change your Correspondence Address to your Residential Address. You will be unable to change this for 5 years.
• Correspondence addresses must now be UK based only.
• Too many disqualifications or orders may result in your Company being suspended. You will be required to cease all operations until completed.
• Companies House may demand extra information when appointing or terminating any officer. Offences can be issued if non-compliant.
• Disqualified persons cannot file at Companies House.
• Court Orders will now be required for reductions of Share Capital.
• You will no longer be able to have three-tiered corporate officers.
• Making false/misleading/deceptive statements is an offense. If a member of a company commits an offense, all officers may be charged with an offense.
• There will now be a limit on how many companies you may be an Officer for (amount to be considered).

To name a few…

Summary

ID’s – everyone will require their ID documents to be verified.

Increased Fees – to deter would-be fraudsters, fees will be increasing across the board.

Due Diligence on Partnerships – all 3rd party vendors and business partnerships you enter into agreements with must be vetted to limit blowback risk.

Abridged Accounting – all small companies will now have to file Balance Sheets, Profit and Loss account and a Directors Report.

Ensure Companies House and HMRC accounts are consistent – cross-referencing the data across all platforms and ensuring they are consistent.

Ensure ALL Relevant Partners Are Aware – notify all appropriate persons of the upcoming changes and consequences.

As we navigate through these changes together, Registered Office (UK) Ltd remains committed to providing seamless support to our clients. With Companies House increasing its prices across the board, why not seize the opportunity to make use of our affordable and prestigeous Virtual Office Addresses? With our Virtual Business Addresses in London, have your business mail (mail received from banks, clients, suppliers, investors, service providers and other third parties with whom you do business) sorted daily and forwarded to you by 1st Class post (or alternatively, they can be scanned and sent to your Client Portal). With access to meeting rooms from just £20 per hour, our low-cost virtual business address service provides a huge saving compared to a traditional office space.

If you wish to learn more about our locations or services, please speak to one of our friendly team on 020 7183 3787 or email us at contact@thelondonoffice.com. Alternatively, click here to instantly access our Live Chat.

Further Reading:

February 2022 White Paper – Corporate transparency and register reform – GOV.UK (www.gov.uk)

Government Factsheets – Economic Crime and Corporate Transparency Bill 2022: Factsheets – GOV.UK (www.gov.uk)

Explanatory notes – Economic Crime and Corporate Transparency (parliament.uk)